Brazil’s Monetary Policy Committee (Copom) is expected to pause its rate-cutting cycle at Wednesday’s meeting and keep the Selic benchmark rate at 13.75%, according to surveys by Bloomberg and the Central Bank. Both surveys show a median forecast of 13.75%. Of the 29 economists surveyed by Bloomberg, 24 expect rates to stay unchanged, while five anticipate a further cut of 0.25 percentage point.

Market expectations shifted after the previous projections, made in the penultimate week of October, pointed to a year-end Selic rate of 13.25%, with cuts expected in November and at the meeting scheduled for December 8 and 9. The change followed a deterioration in investors’ risk perceptions, with currency depreciation, fiscal uncertainty, volatility in future interest rates and higher oil prices cited as factors complicating the outlook for inflation.

At its previous meeting on September 16, Copom did not signal its next move. The committee said the total size of the rate-cutting cycle would depend on new information and on the risks surrounding prices, with the goal of bringing inflation to the 3% target.

Under Brazil’s continuous inflation-targeting framework, the target is considered missed if inflation remains outside the 1.5% to 4.5% range for six consecutive months. Copom’s reference scenario projects inflation of 5.2% this year, 3.9% in 2027 and 3.2% in the first quarter of 2028. The IPCA consumer price index rose 4.58% in the 12 months through September, while the Focus survey forecasts 5.20% inflation by the end of the year.

The expected pause comes amid renewed market concerns about the government’s economic policies following President Luiz Inácio Lula da Silva’s reelection. Government and Workers’ Party allies have criticized market reactions and argued that any spending cuts should protect social programs.

On Tuesday, Brazil’s benchmark stock index fell 1.42% to 165,528 points, its lowest closing level since January and its sixth consecutive session of losses. Interest rates on DI futures contracts maturing in January 2031 and January 2035 rose by more than nine basis points each. The dollar gained 0.70% against the real, closing at R$5.486, its highest level since December 2025.

Sources: Folha Mercado.